I'm an expert in business growth and overcoming organizational obstacles to success and a public speaker at conferences and management meetings on how to grow your organization. I'm a workshop leader for companies wanting to find their next growth engine, an author of "Create Marketplace Disruption: How to Stay Ahead of the Competition" (Financial Times Press), a contributing editor for "International Journal of Innovation Science" and a leadership columnist for CIOMagazine and ComputerWorld. I am a former head of business development for Pepsico and Dupont, consultant with The Boston Consulting Group and am currently Managing Partner for Spark Partners. Harvard MBA. Hail from Chicago.

Why Tesla Is Beating GM, Nissan and Ford

The last 12 months Tesla Motors stock has been on a tear. From $25 it has more than quadrupled to over $100. And most analysts still recommend owning the stock, even though the company has never made a net profit.

Tesla is #1 in electric automobiles

There is no doubt that each of the major car companies has more money, engineers, other resources and industry experience than Tesla. Yet, Tesla has been able to capture the attention of more buyers. Through May of 2013 the Tesla Model S has outsold every other electric car – even though at $70,000 it is over twice the price of competitors!

For the big car companies electric cars, at 32,700 units January thru May, represent less than 2% of the market. To them these cars are simply not seen as important. So what if the Tesla Model S (8.8k units) outsold the Nissan Leaf (7.6k units) and Chevy Volt (7.1k units)? So what if the Model S has a multi-month backlog while the others sit in dealer inventory? These bigger companies are focusing on their core petroleum powered car business. Electric cars are an unimportant “niche” that doesn’t even make any money for the leading company with cars that are very expensive!

This is why big companies are beaten by little companies.

This is the kind of thinking that drove Kodak. Early digital cameras had lots of limitations. They were expensive. They didn’t have the resolution of film. Very few people wanted them. And the early manufacturers didn’t make any money. For Kodak it was obvious that the company needed to remain focused on its core film and camera business, as digital cameras just weren’t important.

Of course we know how that story ended. With Kodak filing bankruptcy in 2012. Because what initially looked like a limited market, with problematic products, eventually shifted. The products became better, and other technologies came along making digital cameras a better fit for user needs.

Tesla, smartly, has not tried to make a gasoline car into an electric car – like, say, the Ford Focus Electric. Instead Tesla set out to make the best car possible. And the company used electricity as the power source. By starting early, and putting its resources into the best possible solution, in 2013 Consumer Reports gave the Model S 99 out of 100 points. That made it not just the highest rated electric car, but the highest rated car EVER REVIEWED!

As the big car companies point out limits to electric vehicles, Tesla keeps making them better and addresses market limitations. Worries about how far an owner can drive on a charge creates “range anxiety.” To cope with this Tesla not only works on battery technology, but has launched a program to build charging stations across the USA and Canada. Initially focused on the Los-Angeles to San Franciso and Boston to Washington corridors, Tesla is opening supercharger stations so owners are never less than 200 miles from a 30 minute fast charge. And for those who can’t wait Tesla is creating a 90 second battery swap program to put drivers back on the road quickly.

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Adam, I very much agree with your thesis and the examples you sight as relevant prior cases.

I think with Tesla and the automotive industry, there is an added element that makes this phenomena even more advantageous to Tesla. Because of the enormous barriers to entry in the automotive industry, it has in effect been an oligarchy of about a dozen major global players. This is why so many dismissed Tesla’s chances without looking deeply, i.e., “we’ve seen Telsa’s future, it’s Delorean, Tucker, etc…” So for decades the oligarchy has been making money with a mote protecting it from full on technological competitive forces. This has two major effects, a) the blindness to the disrupter phenomena you sight in other industries was extra strong from decades without disruption, b) a company breaking through the mote would have tremendous opportunity for innovation as the oligarchy was, shall we say, less inspired to innovate for decades. As I recently read one person describe it, Tesla’s innovating wirelessly upgradable cars, with swappable batteries that have triple the range of the competition, while the OEMs tinker with headlight design, and satellite radio interfaces.

Tesla has greater range because they’re willing to spend more on a battery than any other manufacturer. They don’t have any unique technology, they’ve just been willing to brute force the range issue by installing a 1,000+lb battery that costs $20k+. There may be a market for that solution, but it’s not a large one.

If and when someone makes a breakthrough in battery technology, all of the automakers will have access to it and they’ll all build a great EV. EVs are actually easier to build and far simpler than an ICE vehicle. They just cost more due to today’s battery limitations.

Indeed they have a bigger battery… a business strategy they saw that no one else did. Hunter if you are sincerely under the impression they do not have any unique battery technology, I sincerely suggest you dig deeper. You might want to google interviews with JB Straubel to begin.

Hunter Smith is exactly right. All of these painful recitals of stories of disruptive technology that caught industries leaders by surprise overlook the fact that there is NOTHING DISRUPTIVE ABOUT TESLA’S TECHNOLOGY.

Electric cars are over a hundred years old and battery technology has been essentially flat for the last decade. If a battery breakthrough DOES occur (it would need to double or triple the cost/performance of current battery tech), it will be trivial for the large manufacturers to produce their own versions.

If we charitably assume that there will be a huge battery breakthrough in the next few years, the better analogy might be the Diamond Rio mp3 player. It sold fairly well during the 1998 holiday season to tech fans, but mp3 players didn’t take off until years later when smaller hard drives and lower price/MB of flash memory made a portable digital music player an attractive option.

IF mobile electricity storage technology ever DOES become disruptive, we will know it has happened not based on the auto industry but from the futures market for oil. Manufacturing electric cars is the same basic model as manufacturing gasoline cars, but if there were a cost and weight/performance effective way to build electric vehicles, then the price of oil futures would drop as traders anticipated dropping demand.

Personally, I think that hydrogen, while politically out-of-fashion, is a better bet for a technology-based disruption of the oil industry than batteries.

Hunter Smith, a disruptive innovator does not need to invent anything new. Steel mini-mills were no great technology, but they eventually drove all profits out of integrated steel manufacturing. Amazon didn’t invent anything, but it has changed the face of retailing. Kodak invented digital photography, but it was Japanese camera manufacturers that changed the industry and killed film sales.

It doesn’t matter how Tesla solves user concerns. What matters is they are solving them – and in ways that are attracting more customers to their market.

Thanks for commenting mvetsel. But you don’t need disruptive technology to change a market. There is nothing all that disruptive about early smartphones or tablets, but apps made them very productive and easy to use and met a growing desire for mobility (and always on operation.) Steel mini mills had no new technology, but they changed the logistics of steel production and better met customer needs for less inventory and shorter supply chains. Changing a market does not require a technology breakthrough.

The Tesla supercharging stations and 90 second battery swaps are not technology breakthroughs. But they help solve the “range” problem of electric cars. Anyone could do it – but only Tesla is doing it. By making electric cars reliable, easy to use and increasingly affordable Tesla is changing the game. And if the other auto companies wait on battery breakthroughs it will be way too late for them.

I’m very familiar with their battery. It’s made up of thousands of laptop cells. So what? They’re not getting any greater kwh by design. They’ve just built a bigger battery. That strategy is open to anyone.

So why don’t you tell me what’s different about their battery technology? They’re simply using thousand of smaller laptop cells vs the larger cells the other manufacturers have chosen to use. They haven’t come up with any new battery chemistry or any more powerful configuration. They’ve simply built the biggest battery yet. Anyone can do that.